Maintaining your Business Plan

The purpose of maintaining your plan is to use business results to guide your future decisions. The plan itself has no value if it does not help you improve business. That&undefined;s regardless of how good or bad, how brilliant the ideas, writing, or how elaborate the tables and charts. Its value is the decisions it leads to.

That means, of course, that to make a plan worth the effort of developing it, you&undefined;ll want to follow it up. Whether that&undefined;s every month or every quarter, you need to track results, analyze the difference between plan and actual results, and manage. Change things that need to be changed. Compare what you planned to what happened in reality. Ask yourself the following questions:

• What went wrong, and how can we fix it?
• What went right, and how can we take advantage of it?
• What changes took place in the competitive landscape that could be updated in the plan?
• What changes took place affecting our market that could be updated in the plan?
• What changes took place internally in our organization that could be updated in the plan?

After you have answered these questions, update your plan accordingly, set new budgets and milestones, adjust your financials, and repeat the process with another review of your plan again next month or next quarter. Update your plan accordingly again, and keep repeating. You&undefined;ll find that maintaining your business plan gives you a better grasp on your business, your market, and everything else that happens with your company.

Major changes in internal situation.

The other major change which can affect your business plan is an Internal Change.

The most obvious major changes are changes in ownership, which are frequently the result of changing partnerships, divorces, deaths, and investment. The company takes on new partners, or sells out to a larger company. On a more ominous note, the company suffers significant declines in sales, profits, and financial health.

Always keep the revision in perspective. While you do want to review and correct constantly, you don&undefined;t want to change a strategy unless you are sure it isn&undefined;t working or you see real changes in the underlying assumptions that formed the foundations of strategy.

Major changes in market situation.

Look out for major changes in market situation.

Look especially for changing market factors and changing market behavior.

• Have your underlying business assumptions changed? As an example, the Internet has changed the business landscape so enormously that in some industries almost any plan that was developed without a view of the Internet may need revisions. That may not be true for a landscape architect or restaurant, but for a travel agent, graphic artist, or market researcher it&undefined;s obvious.
  
  
• Do you have new competition? Have new competitors emerged, or existing competitors changed the business landscape so much that you need to review and revise?
  
  
• Has the product or service picture changed? For example a new technology may have emerged, changing the market perception of what you sell. There may be new products or services offering related solutions to the same user needs you satisfy.

To maintain your Business Plan wou must be very watchful of your target market.

Reviewing Your Plan

So how do you maintain your business plan? We have to first establish that without regular review -- monthly or at least quarterly review of your planned vs. actual results, with practical analysis of the reasons for variance -- planning is likely to be a waste of time.

Real planning requires regular reviews just as much as navigation requires knowing where you are as well as where you were and where you wanted to go.

Every real plan needs to be full of specific dates, budgets, forecasts, and management responsibilities. People involved have to know there will be tracking and following up on specifics. Then that plan must be reviewed against results, and those reviews should produce course corrections and fine tuning.

Generally a business hopes for a consistent long-term strategy built on short-step incremental changes, not major revisions. Consistency is important to strategy, and the business should avoid the temptation to jump around from one strategy to another so quickly that no strategy is ever really implemented. Remember that even a mediocre strategy well and consistently implemented is much better than a brilliant strategy that wasn't implemented.

However, businesses do come to crossroads demanding major revisions in their business plan. Read the nest article to get a measure of such circumstances

Business Plan Maintenance

A business plan is not a one-time document, at least it should not be. Most businesses put together a business plan during their start-up phase to organize, attract partners and employees, and to try and get a loan or financial investment. This is a great use of a business plan, however far too often once the company has started up the plan isn&undefined;t touched again.

Ultimately, a business plan is about results, about making your business better. If you don&undefined;t think doing a business plan will improve your business, then don&undefined;t do one. Planning for planning&undefined;s sake is a waste of time.

Where a plan is most likely to make your business better is by allowing you to:

1. Set priorities properly.
2. Track plan vs. actual results and make course corrections.
3. Plan and manage the critical numbers that aren&undefined;t intuitive: not just profit and loss, but the relationship to cash flow, balance sheet, and ratios.
4. Communicate your plan to others: partners, employees, lenders, and investors. You may have a great plan in your head, but as soon as you need to explain it to others, you need to write it down.

Gathering Information For Your Plan

Once you have decided to design or wriye your own plan you need information. A common problem people encounter when writing their business plan is finding information about their business industry and competitive companies. Fortunately, in recent years the Internet has made information gathering simple and easy, but sometimes the best information is found much closer to home, with real people, in real time.

Always take a look at other businesses similar to your own, as a very good first step. If you&undefined;re looking at starting a new business, you may well be starting one similar to one you already know. If you&undefined;re doing a plan for an existing business, you are even more likely to know the business well. Even so, you can still learn a lot by looking at other similar businesses.

• Look at existing, similar businesses.
  
  If you are planning a retail shoe store, for example, spend some time looking at existing retail shoe store businesses. Park across the street and count the customers that go into the store. Note how long they stay inside, and how many come out with boxes that look like purchased shoes. You can probably even count how many pairs of shoes each customer buys. Browse the store and look at prices. Look at several stores, including the discount shoe stores and department store shoe departments.
  
  
• Find a similar business in another place.
  
  Find a similar business far enough away that you won&undefined;t compete. For the shoe store example, you would identify shoe stores in similar towns in other states. Call the owner, explain your purpose truthfully, and ask about the business.
  
  
• Scan local newspapers for people selling a similar business.
  
  Contact the broker and ask for as much information as possible. If you are thinking of creating a shoe store and you find one for sale, you should consider yourself a prospective buyer. Maybe buying the existing store is the best thing. Even if you don&undefined;t buy, the information you gain will be very valuable. Why is the owner selling? Is there something wrong with the business? You can probably get detailed financial information.
  
  
• Always shop the competition.
  
  If you&undefined;re in the restaurant business, patronize your competition once a month, rotating through different restaurants. If you own a shoe store, shop your competition once a month, and visit different stores.

It takes a little hard work but by using the Internet and doing some research at local businesses, you should be able to gather all the information necessary for your business plan.

How do you write a business plan?

Sitting down looking at a blank computer screen as you prepare to start your business plan can be daunting. You may want to look at some alternatives mentioned below that will make the process a bit easier.

Hire a Professional

A professional consultant will create the business plan for you, but you still have to be prepared to think through your business and understand the underlying concepts in your business idea. You will have to work closely with the consultant to ensure that he or she develops a good plan that accurately represents your business or business idea. You can find a list of business planning consultants at www.planconsultants.com.

Buy a Book

There are many good books on the market that will help you to understand what needs to go into a good business plan. You can read Timothy Berry's "Hurdle: the Book on Business Planning".

Use Business Planning Software

A good business planning software package will provide you with an outline for a well-developed, objective-based and professional business plan. Software packages will remove the problem of starting from scratch by structuring your plan for you. The software should ask you the right questions that will pull out the most important underlying concepts within your business idea. Find out more about one of the leading software package on the market, Business Plan Pro.

What makes a successful business plan?

I will be very short here as this is discussed in detail in some other article. The basic ingredients for a successful business plan are :

• A well thought out idea
  
  
• Clear and concise writing
  
  
• A clear and logical structure
  
  
• Illustrates management&undefined;s ability to make the business a success
  
  
• Shows profitability

If you have got the things correctluy assessed and documented as mentioned above then you are ready to hit the road :)

What's in a business plan?

A business plan should prove that your business will generate enough revenue to cover your expenses and make a satisfactory return for bankers or investors.

1. Executive Summary--features the highlights of your plan and sells your idea in two pages or less.
2. Company Summary--a factual description of your company, ownership, and history.
3. Products (or Services or both)--describes your products and/or services and how they stand out from competitive products and services.
4. Market Analysis-provides a summary of your typical customers, competitive landscape, market size, and expected market growth.
5. Strategy and Implementation-describes how you will sell your product, how you will put your plan into action, and establishes milestones.
6. Management Summary-provides background on the management team, their experiences, and key accomplishments.
7. Financial Plan-contains key financials including sales, cash flow, and profits.

There can be many more elements depending on what type of business you are planning.

Do I need a business plan?

Not everyone who starts and runs a business begins with a business plan, but it certainly helps to have one. If you are seeking funding from a venture capitalist, you will certainly need a comprehensive business plan that is well thought out and contains sound business reasoning.

If you are approaching a banker for a loan for a start-up business, your loan officer may suggest a Small Business Administration (SBA) loan, which will require a business plan. If you have an existing business and are approaching a bank for capital to expand the business, they often will not require a business plan, but they may look more favorably on your application if you have one.

Reasons for writing a business plan include:

• Support a loan application
• Raise equity funding
• Define and fix objectives and programs to achieve those objectives
• Create regular business review and course correction
• Define a new business
• Define agreements between partners
• Set a value on a business for sale or legal purposes
• Evaluate a new product line, promotion, or expansion

Business Plan

The best way to show bankers, venture capitalists, and angel investors that you are worthy of financial support is to show them a great business plan. Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen. Your business plan is like your calling card, it will get you in the door where you&undefined;ll have to convince investors and loan officers that you can put your plan into action.

Once you have raised the money to start or expand your business, your plan will serve as a road map for your business. It is not a static document that you write once and put away. You will reference it often, making sure you stay focused and on track, and meet milestones. It will change and develop as your business evolves.

Discuss everything in detail

The end should be happy.. (last part)

"You're fooling yourself if you think there's never going to be a disagreement." That turned out to be a smart move. The incorporation process forces partners to face tough issues right at the outset, says Richard Harroch. Incorporation documents will clearly define the specific roles each partner is expected to play, as well as address other issues like how to bring in a third partner or drum up additional financing. While a general partnership agreement may seem like a simpler, more affordable option, such agreements often cause trouble in the long run because they are too broad, cautions Harroch. Ambuehl and Clark faced one of the toughest questions when launching ATM Express. Their main investor asked, "What happens if the two of you get to a point where you don't want to be partners anymore?" Ambuehl and Clark answered the question by drafting employment contracts that locked them into the partnership for five years.

Discuss possible exit strategies. It seems counterintuitive, but the best time to begin exploring exit strategies is at the outset. Of course, in a perfect world, all partnerships will last until the parties involved are ready to sell or merge or otherwise move on to new things. But it's seldom that simple. Indeed, the more likely scenario is that one partner will wind up buying out the other, so it's wise to put a buy-sell agreement in writing at the outset, says Cliff Risman, of Gardere Wynne Sewell, a Dallas-based law firm. The buy-sell is a mechanism by which partners agree in advance that should a dispute arise later on, one partner can buy the other out. "If you don't," Risman says, "you're leaving yourself open to the worst-case scenario -- where a jury of your peers will decide it for you."

Agree to disagree. Back in Billings, Ambuehl and Clark aren't too worried about their disagreement over the acquisition. When they founded their business five years ago, they decided that they would make a major move like an acquisition only if they both agreed on it. "If there's no agreement, there's no deal," Clark maintains. "That's the solution." Whether or not they decide to make the purchase, both men are convinced that their partnership -- and their company -- will survive. "You're fooling yourself if you think there's never going to be a disagreement," Clark says. Ambuehl agrees: "Neil and I don't draw lines in the sand and say, 'This is the way it is, period.' We don't try to back one another into a corner. We know we have to bend."

By: Dimitra Kessenides

Get down to nitty gritty

The end should be happy (...contd.)

Finally, before entering into any partnership, do some due diligence. It might be awkward, but even if you get along fine, ask for financial statements and a resume that includes the names and phone numbers of past investment partners. Then start dialing. ATM's Clark even suggests that potential partners take a personality test, then compare the results.

Get down to the nitty-gritty. In the early '90s, Ambuehl and Clark were college friends who owned a piano-moving company. They formed that first partnership with little more than a handshake and a slap on the back. But when they founded ATM in 1999, they decided to establish a more formal structure, partly because they intended to drum up outside investing. They hired a lawyer and formed a C corporation. (...contd)


By: Dimitra Kessenides

Better Plan ahead to avoid disaster

The end should be happy - contd.

Better to plan ahead. Here's how you, too, can forge a better match:

Choose wisely. Do you even need a partner in the first place? Maybe not. A potential mate should bring something substantial to the table -- like deep pockets or industry connections. Be sure to choose someone who complements, rather than mirrors, your own skills. At ATM, Clark is the sales whiz, for instance, while Ambuehl is the manager. "We knew going in that we had these strengths," says Ambuehl. "It offers us two viewpoints on everything, and even though we can step into each other's roles, we've always been real careful not to step outside our bounds." Just as important is for you and your partner to share the same strategic vision. If you have dreams of going public in five years, for instance, and your partner is happy running a small shop, there's bound to be conflict down the road.

Sure, complementary skills and a shared vision are a good starting point, but you should never underestimate the importance of actually liking your partner. Just ask Naomi Miller, an architectural lighting designer based in Troy, N.Y. Miller joined a lighting firm in San Francisco as a co-partner in 1991. She knew and respected her partner professionally, but while the pair agreed on business-related matters, Miller quickly realized that the two had no personal rapport. "I found that I didn't really look forward to going to lunch with this guy," she says. "I just wasn't having as much fun as I had anticipated." Two years later, when Miller had the chance to leave San Francisco and end the partnership, she didn't hesitate. (....contd)


By: Dimitra Kessenides

The End should be Happy

Many business partnerships end in disaster. Yours doesn't have to.

Marty Ambuehl and Neil Clark truly enjoy being business partners. They appreciate each other's relaxed and playful attitude toward what they do, and like the way each partner challenges the other to do better, more creative work. "We push each other," Ambuehl says. "We balance each other very well."

Still, they don't agree on everything. In fact, the co-founders of ATM Express -- a Billings, Mont., distributor of automatic teller machines -- are in the midst of a fairly significant disagreement right now. A tempting acquisition target has recently presented itself. Ambuehl sees the purchase as a great expansion opportunity, but Clark is reluctant to take such a big step. Fortunately, the twosome prepared for just such a scenario years ago, long before the ink was dry on the company's incorporation papers. Careful planning at the beginning, it turns out, has been key to the success of their partnership and their company, which generated more than $19 million in revenue last year.

Unfortunately, many partners only learn that lesson the hard way. "People go in with the best of intentions," says Richard Harroch, a partner at San Francisco law firm Orrick, Herrington & Sutcliffe and an adviser to start-ups. "They're more excited about getting into the business and doing it than they are about the legal details." And that can be a real danger. Left ignored, details that seem tiresome or unimportant at the outset lead to big problems -- and can even destroy a business. The stress of battling a partner is enormous, and protracted litigation can sap financial resources and cut away at the value of a company. (...contd)

By: Dimitra Kessenides

The Advantage and disadvantage of Partnership

One big advantage of a general partnership is that you don't have to register with your state and pay an often hefty fee, as you do to establish a corporation or limited liability company. And because a general partnership is normally a " pass through" tax entity (the partners, not the partnership, are taxed unless you specifically elect to be taxed like a corporation) filing income tax returns is easy. Unlike a regular corporation, there is no need to file separate tax returns for the corporate entity and its owners.

But given that the business-related acts of one partner legally bind all others, it is essential that you go into business with a partner or partners you completely trust. It is also essential that you prepare a written partnership agreement establishing, among other things, each partner's share of profits or losses, day-to-day duties and what happens if one partner dies or retires.

A major disadvantage of doing business as a general partnership is that all partners are personally liable for business debts and liabilities (for example, a judgment in a lawsuit). While it's true that a good insurance policy can do much to reduce lawsuit worries and that many small, savvy businesses don't have debt problems, it's also true that businesses which face significant risks in either of these areas should probably organize themselves as a corporation or LLC.

Copyright 1999 Nolo.com, Inc.

Collaborating with a business partner

It may be that these lesser forms of collaborating make you more profitable or they may require more time than you realize in financial gain, but since your ultimate objective is to acquire a partner, you can consider this "dating" as an investment.

While you're engaged in these less-involved forms of collaborating, observe the behavior of the company or person you're working with, listen to their "war stories," particularly about litigation or financial problems, and notice your own emotional reactions to the interactions you have. If all signs are "go," then proceed to proposing.

How do you find people or firms you can collaborate with? You may do it online in listserv groups, on message boards and via their web sites; reading what they write or is written about them in print publications pertinent to your interests. But most people are more comfortable with contacts they make either through referrals by "gatekeepers" and colleagues or through contacts they make at meetings and events. Gatekeepers are often active participants in their professional organizations so attending such functions is a good way to meet them. Since you're located in Fairfield, driving to the Bay Area or Silicon Valley may not be your favorite use of time, but these areas will provide you with the opportunity to make more contacts.

Paul and Sarah Edwards

How to find a business partner

A partnership is like a marriage in important ways, like requiring a high level of trust and the fact that not anyone will do. And, as in marriages, divorce is common; in fact it' s more so in partnerships. Since the divorce rate is running at 53%, you should proceed carefully in taking an important business risk with less than a 50-50 statistical outlook. Unfortunately business breakups are often unpleasant and expensive. We have tracked over a hundred different businesses since 1989 and for some of our books, we turn to these people for their experience.
So when we added a chapter on "Overcoming Obstacles" to Secrets of Self-Employment, we asked our business owners about their worst business experiences. Overwhelmingly, the worst experiences involved failed partnerships. So, when we turned to this same 100+ businesses about a year later when writing Teaming Up: The Small Business Guide to Collaborating, to ask them about the ways in which they collaborated and how interested they were in collaborating in the future, we were surprised to learn that 61% were actively engaged in some form of business collaboration and 70% wanted to do more in the future.

Does hope spring eternal or is there a rational way to explain this? We think both are true. First, there are compelling reasons, such as your own, for finding co-venturers. Second, there are more ways to collaborate than having a partnership, which requires a high level of intimacy, albeit business intimacy. Intimacy does not develop from a contract, however laboriously and carefully drafted.

So our advice in finding a partner is to "date first." Engage in some of the other forms of business collaboration, such as jointly bidding on projects, subcontracting with another firm or principal, engaging in cross-marketing efforts, or making mutual referrals. It's a lot easier to find someone for these more limited risks than to find a full partner.

By: Paul and Sarah Edwards

Seven events in a partnership's life that are most likely to destroy it

Partnerships can sour at any time, for any reason. But certain events are common flash points, so don't let them surprise you. Among them:

1. One of the partners divorces
   
   
2. The company grows suddenly
   
   
3. A partner brings a spouse or relative into the business
   
   
4. Because of increased financial needs, a partner wants to take more money out of the business
   
   
5. Partner A pinches Partner B's bottom, introducing a new complication to the relationship
   
   
6. Partner B has a tragic motocross accident (or other medical misfortune)
   
   
7. Then there's good old malfeasance, such as when Partner A begins doing business with customers on the side--"usurping corporate opportunities," lawyers call it--and thus violates his or her fiduciary obligation to Partner B.

You must be careful of these events and judge appropiately.

The Art (Not Science) of Picking the Right Partner

Griffith, a lawyer at Waller Lansden Dortch & Davis, in Nashville, remembers the time two men came into his office and announced that they wanted to form a partnership. One was going to be the CEO. The other was to put up the money. "They had a concept," recalls Griffith, "and they were both going to make a million dollars on it."

So Griffith walked them through some rudimentary questions. "Who's going to have control?" he asked. The would-be CEO spoke up first: "I'm running it, so me." But the money man quickly contradicted him: "Well, it's my money." The two finally agreed that a third party would break any impasse.

Griffith moved on to question number two. "If this guy puts up more money," he asked, pointing at the financier, "does he get more control?" Another hot disagreement ensued, during which the money man began gesticulating violently in his swivel chair. The chair broke, sending him tumbling. The partnership fell apart, too. "They had come in expecting a bridal suite," says Griffith, "and 30 minutes later they left with pieces of chair on the ground."

Such is the half-baked thinking behind many a partnership. Says Mardy Grothe, a Bedford, Mass., psychologist who counsels partners, "It's amazing to me that people don't sit down and talk about it." They don't subject their choices to even a modicum of scrutiny, although it's likely they'll spend more time with their partners than with their spouses.

So how does one find the right fit? "Do a little dating," suggests Peter Wylie, a Washington, D.C., psychologist. "Take on a challenge together, like meeting a deadline." Dennis Jaffe, a San Francisco-based consultant, suggests drawing up "a statement of expectations--a charter, a constitution that can be referred to." And not with any lawyers around: "Draw it up yourself, in your own words."

Or simply talk. "Let's sit down and talk about the reservations that are being dimly experienced deep in our gut," Grothe counsels, "that we're almost pushing out of the way because we want to go into this thing with fervor."

He also recommends asking a prospect for permission to talk to someone he or she has partnered with in the past: "If someone says, 'No way,' that would be a bit of a red flag."

But perhaps the most important due diligence to be done, says Grothe, involves yourself. "Get your spouse or your friends to tell you whether you're good partner material," he says--that is, examine your own potential strengths and weaknesses.

By: Jerry Useem

What do investors consider an ideal team of founders?

If you want to build a business with real growth potential, you can't do it alone. No matter how smart or driven you are, you need help. Investors know this, so when they look at a company, they want to see a management team, not just one person with a great idea.
You may already be working with another person -- or a group of people -- as you build your company, but that doesn't necessarily mean you have a good team in place.

In my experience, many investors look for a founding team that includes two people with complementary strengths: They are often described as the "visionary" and the "businessperson." In other words, one founder has the technical skills -- the ability to invent, design, and/or produce the product, service, or technology -- and one has the business skills -- the ability to make sales, build the company's infrastructure, find strategic alliances, manage a budget, etc.

That can be a good balance to begin with in the early days of your company. But as you grow, you'll find you need more help. Often the technically adept founder is unable to actually develop and lead the rest of the technical staff, and the businessperson is often overwhelmed with the time-consuming chore of raising funds.

Other key roles that you'll need to fill -- and which will help reassure afunding source that you're a viable company -- includebusiness development/sales, marketing, and those key roles handling the technology you're developing or using (e.g., chief technology officer or VP of engineering).

Finally, make sure the team works well together as a team. I find that investors are seeing more business problems as a result of dysfunctional management than they are from dysfunctional technology.

Copyright © 2000 Rhonda Abrams
Published October 2000